The US and China have lowered the temperature of their dispute over the renminbi. The US Treasury has postponed a statement due to have been made on April 15 on whether Beijing is manipulating its currency.

Hopes of a compromise rose further after an unscheduled meeting in Beijing last week between Treasury Secretary Tim Geithner and Chinese vice-premier Wang Qishan.

Coinciding with high-profile diplomacy, behind the scenes the Chinese government is signalling a potential way out of its monetary impasse – by increasing the use of the renminbi as an international borrowing currency and reserve asset.

This is certainly not a short-term route out of the generalised swapping of complaints between China and the US over Beijing’s policies on the renminbi, which is leading to growing congressional pressure on the Obama administration for protectionist action against China. However, for the time being wiser counsel seems to be prevailing. The Treasury’s action to delay the renminbi statement allows Chinese President Hu Jintao to visit Washington for a summit on nuclear security on April 12-13 without the threat of a potentially hostile renminbi declaration hanging over him.

Longer term, statements from Chinese officials that Beijing will do its best to rely increasingly on its own resources in international monetary affairs demonstrate China’s growing practical efforts to lower the undue international dominance of the dollar. None of these steps is particularly significant by itself, but – taken together – they add up to a genuine move towards a multi-currency reserve asset system in a way that does not inflame the US nor expose China to further losses on its gigantic stocks of US Treasury securities.

China has started an initiative to encourage central banks in Asia and further afield to hold renminbi in their foreign exchange reserves. Malaysia, which occupies an important position in monetary negotiations between Asia, the US and Europe, has played a significant part in leading the way in Asia towards greater reserve use of the Chinese currency.

In addition, the Chinese authorities are gradually moving towards encouraging greater use of the currency in borrowing operations by international organisations and companies. At the same time, use of the renminbi in payment for internationally traded raw materials is being stepped up. Over time, other countries will pay China in renminbi for its exports. If such a trend continues, the vast build-up of foreign exchange reserves (currently $2.4 trillion) that has plagued domestic monetary polices as well as Sino-American relations will automatically tail off.

A battery of Chinese ministers, led by Premier Wen Jiabao, has indicated that China will not give in to American invective aimed at dislodging the renminbi from its dollar peg. Zhong Shan, the deputy Chinese commerce minister, said during a recent visit to Washington that American pressure for a stronger renminbi was “unacceptable.”

Fred Bergsten, a former Treasury official from the administration of Jimmy Carter, and director of the Peterson Institute for International Economics in Washington, said in congressional testimony in late March that Beijing was manipulating its currency to underpin export performance. But he warned that the key to a sustainable settlement lay in a genuine multilateral approach to tackle China’s burgeoning trade and current account surpluses.

Bergsten was one of four expert witnesses to testify before the House Ways and Means Committee hearing on China’s foreign exchange policy. They voted 3-1 in favour of a Treasury declaration branding the Chinese as currency manipulators, but they urged the US to proceed on a multilateral basis to avoid a damaging confrontation with China.

Chuck Schumer, the influential New York senator, stepped up the pressure on the administration by saying he would seek action this spring on his bill making it easier for the US to impose retaliatory tariffs against countries deemed to have misaligned currencies.

In signalling a retreat from immediate action, the US administration appears to recognise that antagonistic statements impede the chances of Beijing deciding a gradual renminbi revaluation. The People’s Bank of China, the central bank, has been criticised by some Chinese policymakers as appearing too soft in the face of American sniping.

Numerous accommodative statements by People’s Bank of China governor Zhou Xiaochuan on the prospects eventually for a shift in the renminbi policy have met with disdain in high-level Communist party circles in Beijing. America’s tough line on the issue have undermined Zhou’s position and made it more likely that he could be replaced by a hardliner less supportive of US interests.

The political supremos on the Chinese State Council have little truck with arguments that freeing the renminbi would increase China’s ability to control inflation. Instead, they see it as far more propitious that China maintains a policy designed to help exporters.

There are worries on world bond markets that displeasure in Beijing over Washington’s renminbi stance could lead to a lower take-up of US debt. US Treasury bond yields recently surged to above 4% on the 10-year benchmark, their highest since June 2009.

Weak demand at a Treasury auction in the week following passage of the US healthcare reform bill prompted some commentators to suggest that China was cutting back its bond purchases in advance of the April 15 date as a warning shot to Washington.

Eventually, China will undoubtedly move to a more flexible policy for the renminbi exchange rate. But this will be at a time of China’s own choosing, rather than in a manner and on a timetable set by foreign politicians.

In the meantime, gradual steps by China to increase the renminbi’s international importance could, over time, take some of the strain out of the exchange rate issue.

• David Marsh is co-chairman, International Monetary and Financial Institutions Forum and chairman of management consultancy SCCO International.